French regulators allowed Melanion Capital to offer a bitcoin-linked ETF in the European Union. While this asset does not fully correlate with the price of the cryptocurrency, its broad international market and a correlation of 90% + signifies major advancements in how investors can gain exposure to bitcoin.
Fight for Bitcoin ETF
The fight to create a legal, regulator-approved Bitcoin ETF has been an important process that has been going on for years. An ETF is a type of derivative that has its own value set to match the value of some external tangible or intangible asset. This can be, for example, gold or an increase in the share of a specific private company. The mechanisms for keeping this valuation at the right level can be challenging. In ETFs, you should expect slight fluctuations in relation to the real value. However, for most of these funds, there are complex arbitrage systems in place that allow asset managers to react quickly and accurately to changes.
The creation of an ETF with value linked to bitcoin has already been successful in several countries. For example, companies from Brazil and Canada launched their own ETFs in 2020. Since then, millions of dollars have been poured into these intriguing new investment products. However, despite their impressive results, US regulators still haven’t approved any ETF crypto.
While the US market is still skeptical, the launch of the Melanion product is an important milestone for one of the largest cryptocurrency markets in the world – the European Union. Melanion Capital will try to achieve this goal by using the Ucits model. Ucits is a financial model developed 30 years ago with a high level of investor protection. Currently, Ucits is used by most European mutual funds and is a well-trusted tool for investors.
But “Most pipes of the traditional financial system stop at accessing bitcoin” Said Jad Comair, Melanion CEO “The ETF has been a real challenge due to the sensitivity and politics currently surrounding bitcoin and investing in bitcoin.”
For these reasons, this new ETF has no direct contact with bitcoin. Instead, its complicated arbitrage system used to manage the fund’s price is entangled in dozens of related stocks, in industries such as bitcoin mining, blockchain technology, fintech research, etc. Using these various levers, Melanion claims it can correlate ETFs with bitcoin up to 90%. %.